The government has unveiled the initial draft of the Digital Competition Bill, designed to oversee the digital economy and markets. The Ministry of Corporate Affairs has prepared a draft, introducing pre-emptive regulations that mandate digital entities to guarantee interoperability, data sharing, and portability. This draft has been shared with the members of the committee for digital competition law as the government seeks to achieve consensus on the proposed legislation.
The Bill draws inspiration from the digital markets law of the European Union. Rather than focusing solely on numerical data, the draft bill adopts a comprehensive approach to identifying Systemically Important Digital Intermediaries (SIDIs). These entities will be categorised based on their revenue, market capitalisation, the volume of active business and end-users, or their extensive influence on the digital ecosystem. The MCA is set to finalize a report on the draft bill following consultations with committee members.
What is the Digital Competition Bill
The Digital Competition Bill seeks to curb anti-competitive practices by Big tech firms, amid increasing global scrutiny of giants like Google, Apple, Facebook, and Amazon for potential abuse of market dominance through extensive user data utilisation.
To foster fair competition in the digital realm, the bill introduces a dedicated openness chapter, outlining principles for defining market dominance and pinpointing imbalances within the digital marketplace. This move reflects India’s concern over the power wielded by large tech companies and its proactive stance on competition, inspired by the EU’s Digital Markets Act.
Previously, the parliamentary standing committee on finance suggested a digital competition law, leading the ministry of corporate affairs to establish a 16-member committee on digital competition law (CDCL) in February 2023 to draft the proposed law. Additionally, the Competition Commission of India has created a digital markets unit to investigate anti-trust practices by tech firms.
Rajeev Chandrasekhar, minister of state for electronics and IT, emphasised the necessity of holistic cyber laws to create a vibrant, trillion-dollar digital economy. These laws must align with global best practices, be future-proof, and adaptable to rapid technological changes and unforeseen disruptions.
The Bill also seeks to address shortcomings in India’s existing regulatory framework for competition issues. Unlike the current ex-post approach, where the Competition Commission of India can only act after an anti-competitive practice has been proven, the draft Bill advocates a pre-emptive framework, requiring companies to implement measures to avoid abusive anti-competitive practices.
The pre-emptive regulations specify criteria for identifying key e-commerce platforms as gatekeepers and demand API sharing to facilitate user interaction across competing platforms, ensuring a seamless transition between e-commerce applications.
Global best practices
A key example in regulating digital competition is the EU’s Digital Markets Act, effective since November 2022. It seeks to establish a more equitable and competitive digital market by targeting large online platforms with substantial market power. The Act prohibits such gatekeepers from engaging in self-preferencing, unfair data use, and obstructing competitors’ access to users. It also requires gatekeepers to facilitate data sharing and interoperability of their services, encouraging platform-switching and open markets. India’s digital competition bill also is modelled on these principles.
The DMA marks a significant advancement in regulating digital giants and mitigating concerns over their influence. As the compliance deadline approaches in March, tech companies are beginning to adjust, with entities like Google allowing EU users to select the services that can share their data.
The bill also draws from the US Antitrust laws and the UK’s Digital Competition and Consumers Bill, which introduces a pre-emptive regulatory regime, illustrating a global effort to adapt regulatory frameworks to the digital age.
With the digital economy’s rapid growth and digital platforms’ expanding influence, especially post-COVID-19, the need to regulate major technology companies has become pressing. As India anticipates reaching 907 million internet users by the end of 2023 and aims for a $1 trillion consumer digital economy by 2030, the government’s initiative to regulate this sector through the draft bill is a crucial step forward.